Elara Securities in a note on utilities said shares of private firms have outperformed PSU names and are currently overvalued, with companies such as JSW Energy Ltd and Torrent Power Ltd trading in the range of 3.3-5 times their estimated FY27 book values.
The domestic brokerage said it prefers regulated PSU firms, such as NTPC Ltd and Power Grid Corporation of India Ltd, due to assured returns from regulated assets and robust capacity addition pipelines. It also favours Indian Energy Exchange Ltd (IEX), given rising share of short-term power markets and increasing dominance of power exchanges.
"CESC Ltd offers potential upside, driven by significant renewable capacity expansion targets while NLC Ltd appears attractive with plans to double its regulated equity by FY30. In the long term, the hydro sector looks promising due to upcoming capacity addition and renewed focus on the industry. We remain positive on SJVN and NHPC in the hydro space. CESC, NTPC and NLC are our top picks in the sector," it said.
November update Elara said India's power generation rose 3.8 per cent YoY in November, reaching 136 billion units (BU) on high base. Power generation surged 11 per cent YoY to 118BU. Peak power demand in November marks the onset of Winter, standing at 207.0GW, slightly higher than 204.6GW recorded last year, it said.
"Notably, this year's peak demand occurred at the end of the month, contrasting with last year's early November peak, highlighting the shift in demand patterns. Power demand usually tapers off after Summer, allowing generation companies to focus on rebuilding coal stocks. As on November, coal inventory at power plants was at 39.9mn tonne, adequate for 14 days of supply," it said.
Hydro generation sustains growth momentum for the third consecutive month: Hydro power generation sustained robust double-digit growth for the third consecutive month, up 31% YoY to 9.4 BU.The plant load factor (PLF) for hydro plants significantly improved to 25%, compared to a mere 2% in the previous year. Coal-based generation remains stable at 103BU in November 2024 while PLF slightly declined to 66.0% from ~66.5% last year. Nuclear power generation increased 9% YoY, reaching 4.7BU. Gas-based generation, which has been declining since August 2024 due to rising hydro output, fell by 14% YoY to 1.4BU in November, with its PLF dropping to ~8.0%. Meanwhile, renewable energy generation posted robust growth, up 18% YoY to 15BU.
Generation muted on a sequential basis on seasonality: While power generation staged 4% YoY growth on an annual basis, generation declined 11% QoQ on account of the onset of Winter, which has resulted in reduced cooling demand. Generation for coal plants declined 7% MoM, fell for hydro by 41% MoM, dropped for gas-based plants by 40% MoM, and dipped from renewables by 4.4% MoM in November.
In the case of hydro power, generation sustained robust double-digit growth for the third consecutive month, up 31 per cent YoY to 9.4 BU. The plant load factor (PLF) for hydro plants improved to 25 per cent, compared to a mere 2 per cent in the previous year. Coal-based generation remains stable at 103BU in November 2024 while PLF slightly declined to 66.0 per cent from 66.5 per cent last year.
Elara said nuclear power generation increased 9 per cent YoY, reaching 4.7BU, while gas-based generation, which has been declining since August 2024 due to rising hydro output, fell by 14 per cent YoY to 1.4BU in November, with its PLF dropping to 8.0 per cent.
Meanwhile, renewable energy generation posted robust growth, up 18 per cent YoY to 15BU, it said.
Target prices
Among its coverage stocks, Elara has 'Buy' ratings on NTPC (target: Rs 497), Power Grid (target: Rs 384), Coal India (target: Rs 572), Tata Power (target: Rs 518), NHPC (target: Rs 118) and SJVN (target: Rs 137). Besides, the brokerage has Buy ratings on NLC (target: Rs 373), CESC (target: Rs 228) and IEX (target: Rs 220).
It has 'Accumulate' rating on JSW Energy (target: Rs 786), 'Sell' rating on Torrent Power (Rs 1,324) and 'Reduce' rating on PTC India (target price: Rs 207).